QCOM QUALCOMM Inc

By Micah Maidenberg 
 

Qualcomm Inc. (QCOM) is scheduled to report earnings for its fiscal fourth quarter after the market closes Wednesday. Here's what you need to know:

EARNINGS FORECAST: Analysts expect Qualcomm to report adjusted profits of 83 cents a share, according to FactSet. In its fourth-quarter period for 2017, the company reported 92 cents a share in profits on an adjusted basis, which excludes share-based compensation and other costs.

REVENUE FORECAST: Analysts predict $5.53 billion in sales in the fourth quarter. That would represent a 6% decline from the year-ago period.

WHAT TO WATCH:

THE OUTLOOK: In February, as Qualcomm was fighting Broadcom Inc.'s (AVGO) takeover bid, the company's board released a shareholder letter saying it was "highly confident" Qualcomm could deliver $6.75 a share to $7.50 a share in adjusted profit during the 2019 fiscal year. Investors will look for indications Qualcomm can live up to the forecast. Some observers are skeptical such a profit range is within reach, given weak demand for smartphones, a critical market for Qualcomm's modems. Global smartphone shipments fell 6% in the third quarter from a year earlier to 355.2 million units, according to International Data Corp. IDC also guided flat growth in global smartphone shipments next year. Meanwhile, Michael Walkley, an analyst at Canaccord Genuity, wrote in a September note Qualcomm's plan to buy $16 billion worth of shares from three financial-services firms will take at least a year and "limit Qualcomm's ability to repurchase meaningful additional shares." "We think they're going to have to lower their estimates," Mr. Walkley said in an interview.

SETTLE DOWN: Qualcomm is locked in legal battles with Apple Inc. (AAPL), which it accused of intellectual-property theft in an amended lawsuit filed in California in September. A federal judge Tuesday ruled the company must license some of its key industry patents to rival chipmakers. The companies are also fighting over patent royalties, which Apple has withheld, damaging Qualcomm's financial performance. A settlement represents the largest single catalyst that could drive Qualcomm's per-share earnings, adding more than $1 a share on an ongoing basis, according to Nomura Instinet analyst Romit Shah. Meanwhile, Qualcomm appears close to a deal in its dispute over royalty payments Huawei Technologies Co., according to UBS analyst Timothy Arcuri. He notes the Chinese company has already made payments to Qualcomm, leaving $1.5 billion outstanding.

5G ROLLOUT: The forecast for 5G phones and devices will also be on investors' minds. Next year, the first mobile phones built to operate on next-generation 5G wireless networks will start shipping to consumers, creating a significant new opportunity for Qualcomm. As consumers start to switch over to those devices, Qualcomm could counteract some of its struggles with Apple, which is using chips from Intel Corp. (INTC) in its newest iPhones, and potentially offset some of the softness in demand in the smartphone market, analysts say. Most, if not all, of the 5G roads lead through Qualcomm, says Mr. Arcuri of UBS. "It's difficult to envision 5G with Qualcomm not playing a big role in it," he says.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

November 07, 2018 05:44 ET (10:44 GMT)

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